Join Jim Stice for an in-depth discussion in this video Return on equity, part of Finance for Non-Financial Managers.
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- Return on equity is a general overall measure…of how well a firm is doing.…The DuPont Framework breaks…Return on Equity down into three parts:…Profitability,…Efficiency,…and Leverage.…Let's use an example to illustrate.…You can see here that we have Uncertain's…Balance sheet, and their income statement.…What can we conclude by looking at this?…For starters, we can see that they had…Total assets of $14,500,…Sales of $20,000, and Income of $700.…
Is that good?…Is that bad?…It's hard to tell, so let's compare them…with Benchmark company.…What can we conclude by looking…at Benchmark and Uncertain side by side?…Well, the first thing we notice…is Benchmark is bigger.…And if we do a little mental math,…we can conclude, well, it looks like their…net income's higher relative to their sales.…But just a raw comparison of Benchmark's…financial statements with Uncertain's…financial statements that's tough to do.…There has got to be a way to compare…these two different companies of different sizes.…
So, we're going to begin with our first…
- Interpret financial reports and make decisions based on available data
- Manage inventory and receivables
- Create an accurate budget
- Cost a product or service
- Analyze customers
- Understand your income taxes
- Communicate your contribution to the bottom line
Skill Level Appropriate for all
1. Understanding Finance and Accounting
2. Most Common Financial Reports
3. Techniques for Using Financial Reports
4. Short-Term Financial Management
5. Costing a Product or Service
Drafting a budget4m 59s
7. Income Taxes
Next steps1m 38s
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